BI plans to lure export earnings back home

BI plans to lure export earnings back home

JAKARTA (JP): Bank Indonesia (BI) will provide exporters
incentives to lure their billions of dollar earnings parked
overseas back home, acting governor of the central bank Anwar
Nasution said on Thursday.

Anwar said the central bank planned to provide, among other
things, an export swap facility to encourage exporters to
repatriate their dollar earnings to support the rupiah.

"Exporters want a certain assurance that the rupiah will not
weaken once they bring their dollars back," Anwar said following
a meeting with major exporters.

The meeting was convened at the initiative of the National
Business Development Council (DPUN) to discuss efforts to shore
up the rupiah, which has remained weak despite a robust increase
in exports.

The central bank chief reassured exporters at the meeting that
the government had no any intention of imposing capital controls
and would stick to the free-floating system for the rupiah.

He said that under the export swap facility exporters would
not be subject to the risk of rupiah fluctuation when they needed
to convert their dollar earnings into rupiah.

The swap facility would allow exporters in need of imported
raw materials to buy dollars at the same rate as when they
exchanged them with rupiah, Anwar added.

"I asked them (exporters) to cooperate with the central bank
to help stabilize the rupiah.

"If you want a stronger rupiah, you need to increase export
earnings and bring them home," Anwar said.

During the meeting, exporters raised their concerns to the
central bank about the 'credit crunch', as most banks have
virtually stopped lending since the 1997 financial crisis, he
said.

Anwar said exporters also complained about the refusal by
overseas banks to accept letters of credits opened at Indonesian
banks.

"Many exporters therefore prefer opening their letters of
credit at foreign banks, thus requiring them to park their export
earnings overseas," he added.

Anwar also referred to jitters among foreign export companies
about the possibility that the central bank might impose capital
controls in a bid to defend the rupiah, which last month fell
sharply to a 21-month low of almost Rp 9,500.

"I reassured them (foreign companies) that we don't have any
intention to adopt capital controls," he said.

DPUN chairman Sofyan Wanandi said exporters usually keep some
20 percent to 30 percent of their export earnings in foreign
banks.

"They bring back part of their export earnings only to finance
local costs," Sofyan added.

The Central Bureau of Statistics announced on Tuesday that
Indonesia's export earnings in June reached a record high of
$5.29 billion.

However, the boost in foreign exchange earnings did not help
strengthen the rupiah. The local unit only rose slightly on the
back of easing political tensions.

Sofyan said most large exporters and foreign companies
operating in the country kept their earnings abroad because of
the still fragile condition of domestic banks.

He said exporters had expressed their commitment to
repatriating their dollar earnings if a swap facility was
available and if the conditions of local banks improved.

The existing swap facility, he said, was only available for
investment needs and its fee was also relatively high.

Bank Indonesia therefore promised to soon introduce
export swap facilities with a lower fee than that imposed on
investment swap facilities.

"Because exporters bring home dollars, BI can charge them a
lower fee," he said, adding that the fee might only be around 1
percent to 2 percent, compared to 10 percent to 15 percent under
the investment swap.

Sofyan said that some 70 percent of Indonesia's top exporters,
including foreign giants like copper and gold miners PT Freeport
Indonesia, were represented at the meeting. (bkm)